A comparison of the relative reduction in land expectation value due to taxation of private forest land in the United States
Cushing, Tamara L.
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Forestland owners in the United States are taxed at the local, state and federal level. Depending on the state, landowners may be subject to property, severance, yield, and income taxes or some combination. The impact of these various taxes on landowners has been examined many times, but previous studies have focused primarily on only a specific tax concern. The objective of this study is to examine the cumulative effects of each and all of these taxes as they are imposed by the various government entities. We calculate an estimated land expectation value (LEV) for a typical management regime in 22 states using state specific price and output data. An LEV is calculated before taxes as a base case and after each layer of tax is imposed. We then compare the states based on the relative reduction in LEV resulting from an additional layer of tax. Cash flows are also analyzed to determine the effect of a change in any of the input variables. The burden on corporate and institutional landowners was also examined. The results allow for a ranking of states by the total tax burden incurred by landowners. The total relative reduction in land expectation value after all taxes ranged from 19 to 51% for individual landowners. For corporate landowners, the reduction ranged from 41 to 80%. Discount rate and reforestation expense had the largest impact on land expectation value.